Yuan gains popularity among global traders
Updated: 2013-10-18 17:16
GUANGZHOU -- The financial uncertainties conveyed in the US government shutdown have made the Chinese currency, renminbi, more popular among global traders, although the US Congress has passed a bill to end the debt ceiling deadlock.
Businessmen attending the ongoing China Import and Export Fair, or Canton Fair, in Guangzhou, capital of southern Guangdong Province, said they had encountered wider acceptance of the Chinese yuan among their overseas partners.
"Many overseas banks are now more willing to carry out renminbi business," said Zhang Qingfu, head of the Middle East and Africa overseas business division of Haier Group, China's largest home appliance manufacturer, adding that cross-border trades with China can now be settled in renminbi in many countries and regions.
Zhang said Haier had begun to settle its business in renminbi in countries like South Africa, Iran and Sudan over the past year.
"It used to be us proposing to settle trade in renminbi, but now it is our overseas buyers who are more proactive," he added.
Data from the People's Bank of China (PBOC), the central bank, showed that overseas trade settlement in renminbi totaled 3.16 trillion yuan ($515 billion) in the first three quarters of 2013, more than 50 percent up from the 2 trillion yuan registered in the same period last year.
China first kicked off trials of cross-border trade settlement in yuan in 2009 in Hong Kong, Macao, ASEAN countries and selected other locations. The scheme has now been extended to all parts of China and all countries and regions overseas.
Market analysts say that the unexpected fast development of yuan-denominated settlement is rooted in multiple factors. Yet the looming worries over the US dollar on the global market have undoubtedly contributed to the yuan's internationalization and acceptance within a larger scope.
Compared with the dollar, the advantages of renminbi in trade settlement lie in the relatively low risks in exchange rates and costs, said Gao Yuanjia, director of the overseas business of Chunlan (Group) Corp., also a major producer of home appliances.
"Currencies in some other countries have depreciated significantly over a period of time, hiking the cost of imports," Gao said. "Settlement in renminbi can offload such shocks."
The Chinese yuan has appreciated by more than 30 percent against the US dollar since July 2005, when the country scrapped the renminbi's peg to the greenback and adopted a managed-floating currency system.
On Friday, the currency marched to a new high against the dollar, according to the China Foreign Exchange Trading System. The central parity rate of the yuan strengthened 59 basis points to reach 6.1372 per dollar, the strongest since the exchange rate reforms.
Analysts say the expected strengthening of yuan against dollar will make it more popular in cross-border trade.
However, the dominance of the US dollar in global trade remains unshakable despite the fluctuation, and no other currency can now replace it as the international reserve currency, in Gao's view.
Technically, both Chinese and overseas businesses are not as familiar with the processing of yuan settlement as they are with dollar settlement.
More importantly, Chinese currency circulated on the international market remains scarce compared with the dollar, although the Chinese government has been rolling out various measures to internationalize the yuan.
Earlier in October, the PBOC and the European Central Bank signed a 350 billion yuan (45 billion euro) currency swap agreement, bringing the volume of currency swap deals to 2.2 trillion yuan in total with 22 countries and regions.
"The internationalization of renminbi will be a long-term course, and Chinese enterprises must be fully prepared for this," Zhang of Haier Group said.